Coface launches "Power the Core" which will deepen and broaden the Coface franchise.
"Power the Core" will build on the successes of the previous strategic plans
Coface has laid strong foundations which will support its development. It has indeed:
- Built a best in industry risk infrastructure
- Developed a high-performance sales organisation in key markets
- Simplified its operating model
- Established Business Information services (BI) foundations
- Defined a clear Corporate Social Responsibility roadmap
- Nurtured a strong leadership culture
The new plan will deepen and broaden the quality of Coface's franchise
Its targets are, in particular, to:
- Reach data and technology excellence
- Deepen and broaden Coface’s historical Trade Credit Insurance (TCI) franchise
- Grow profitably Business Information services at double digit growth rate
- Leverage its unique culture of a human-sized multinational with a strong commitment to sustainability
Coface, again raises its "through the cycle" financial targets
- An undiscounted combined ratio at ~78% through-the-cycle, a 2 ppts improvement compared to Build to Lead
- A RoATE of 11.0% through-the-cycle, an increase of 1.5 pt at the current level of interest rate environment
- A solvency ratio towards the upper end of the 155%-175% target range with a payout ratio of at least 80%
- An additional contribution from Business Information services to group RoATE of 50bp starting in 2027
1. Strong foundations: Build to lead has met or exceeded all of its targets
Our Build to Lead plan was presented in February 2020. Its execution happened in a particularly shaky environment: pandemic, inflation outbreak, brutal rise in interest rates, war coming back in Europe. Coface has stuck with its strategic direction and was able to rely on its agility to reach or exceed, all of its plan’s targets.
Beyond the financial targets, Coface has simplified its operating model, notably by reducing the number of IT systems by 40% and by decreasing its IT complexity index by 25%.
Over the 2020-2023 period, Coface’s combined ratio was significantly reduced and reached 69.1% on average, a level well below the Build to Lead target and at the best level in the industry. The cost ratio constantly decreased while the loss ratio benefited from past investments in the risk management infrastructure.
Revenues grew on average by 6% per annum, supported by a record retention and by our clients’ turnover growth.
Over the last 4 years, return on average tangible equity was 10.8%, above the 9.5% target.
Finally, despite the numerous shocks, be it economic, financial, or political, Coface’s solvency has constantly remained above its target range which permitted to Coface to be in 2020 one of the very first European insurance companies to restart, with a share buyback, returns to shareholders.
In 2019, the Business Information services were still relatively immature. Since then, they pursued their development and confirmed their growth potential. This activity has strong synergies with Trade Credit Insurance and relies on the same risk infrastructure. It is currently profitable despite significant growth investments. The growth of this pure service activity, which requires no regulatory capital, reached 13% on average between 2019 and 2023.
2. "Power the Core" aims at developing a global credit risk management ecosystem of reference
Coface’s conviction is intact: Trade Credit Insurance is a service business which exhibits high barriers to entry, is growing and among which Coface has built the best risk infrastructure in the market. The latter relies on proprietary data and scores, a global reach, a worldwide technology platform, a through-the-cycle underwriting experience, a robust regulatory and legal set up and a strong balance sheet.
Our strategic plan Power the Core will thus, relying on these strong foundations, broaden and deepen Coface’s franchises. In particular, it will:
- Invest deliberately in data and technology to build new differentiating data and scoring capabilities, integrating the most modern modelling techniques, data science and artificial intelligence in particular. Investments will be specifically oriented towards technology and connectivity for the benefit of our clients.
- Deepen and broaden our TCI franchise. Risk underwriting will remain disciplined while we will continue to invest for growth, especially on the SME and Mid-market segments, and deliver on the simplification of the customer experience.
- Pursue profitable double-digit growth in Business Information services. We will invest to keep building sales teams with consistency, broaden data sourcing, expand use cases, and upgrade IT platforms.
- Leverage Coface’s unique culture. We will further enhance attractive employer value proposition and deliver on our CSR commitments.
3. "Power the Core" will give Coface ambitious financial targets for 2027 and beyond
The rigorous execution of the strategic plan will allow Coface to reach its improved through-the-cycle financial targets:
- An undiscounted combined ratio of ~78% through-the-cycle, a 2 ppts improvement compared to the previous plan
- A return on average tangible equity of 11.0% through-the-cycle. This target is valid at the current level of interest rate environment
- A solvency ratio towards the upper end of the 155%-175% target range with a payout ratio of at least 80% of net income
- An additional contribution from Business Information services to group RoATE of 50bp starting in 2027
Download the Power the Core presentation.